CORRECTED - Montenegrin government takes stake in smelter

BELGRADE, June 4 (Reuters) - Montenegro will boost its stake in indebted aluminium smelter Kombinat Aluminijuma Podgorica (KAP) following agreement with Russian EN+ Group to swap a stake for a bailout package, saving the company from bankruptcy, a top government official said. Under the deal, the cabinet of Milo Djukanovic and KAP previous majority owner, Russia's En+ will each have 29.356 percent in the company and will get government guarantees for a 45 million euro ($63.8 million) loan, said Igor Luksic, Montenegro's finance minister. It will also pay up to 5 million euros from the budget in overdue wages. Luksic said it was a chance for a fresh start for KAP. "It will secure its short-term stability and long-term sustainability." Most of the 45 million euros loan will be used for debt repayment. "The government will offer guarantees for KAP's future borrowing. We will also slightly adjust the 2009 budget as the move has to be approved by the parliament," Luksic said. This is the second government intervention that secured funds for the KAP. Earlier this year the EN+ asked Montenegrin government for guarantees that secured it a loan with Podgorica-based branch of Slovenian Ljubljanska Banka. Luksic said the KAP will have "to optimize workforce and ... reduce operating costs" in its Podgorica-based smelter and the bauxite mine that feeds it. "If, despite optimization, the KAP shows operating losses in the future, the EN+ will have to cover it," Luksic said. The EN+ was also expected to cover debts to energy suppliers and drop a case against the government for 330 million euros launched in 2007 over alleged false evaluation of KAP's assets during its 2005 sale. "This deal is much alike bailout packages we have seen in other countries. We still have more talks with banks to finalize all elements of the deal," Luksic said. The KAP aluminium smelter accounts for 50 percent of the country's exports, but runs at a loss because of low global metal prices and has already decided to cut its production by half, to around 60,000 tonnes in 2009.